Becoming an entrepreneur and managing a small business, side hustle or a new startup can be stressful. There are lots of things to learn and one of them is about taxes.
Taxes are stressful and complicated even for trained professionals who spent years studying the ins and outs of the field. How much more so for millennials, who are deemed as the entrepreneurial generation and who have side hustles aside from their full-time jobs.
More and more millennials are also said to be earning as much as $12,000 per year on freelancing. That's extra money on top of their salary from their full-time jobs.
This is why it's important for aspiring and current entrepreneurs to know about taxes and which business deductions they can avail. Inc. shared seven areas where business owners and self-employed individuals can save on taxes which can be used this year or the next.
Mileage
This is the transportation cost that is necessary for one's business. The income can be reported via Form 1099 and business mileage can be deducted from it even when using a personal vehicle.
Startup Costs
Building a startup is costly and, in truth, may not instantly be able to stand on its two feet. Realistically, it could take years before startup founders generate serious income. The IRS provides entrepreneurs with a chance to claim startup costs, which can also be done retroactively.
Health Insurance
Tax premiums could be tax deductible for business owners who do not have access to employer-subsidized health insurance and set up insurance for business purposes.
Home Office
Entrepreneurs who run their businesses from home regularly are eligible for home office deduction. The requirement is that a specific portion of one's residence is used for business only.
Sustainability
One can also get tax deductions for going green. One option is the IRS Plug-In Electric Drive Vehicle Credit.
Ask for an Extension
For those who need more time to take advantage of these deductions, they can use Form 7004 to request for an extension.
Itemize or Not?
The annual standard deduction depends on which state the business is located. There are times it would be better to itemize and there are times it would be better not to.
Of course, nothing beats going to the experts for professional advice. Taxes are, after all, an entrepreneur's legal responsibility.
